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Fred

Will It Be Different This Time?

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This will have been talked about before im pretty sure, but do people think the time from the highest to the lowest prices will be quicker this time?

The last crash took pretty much 3 years to go from the top to the bottom. Due to higher media coverage and in particular the internet will it be different this time?

I hope think so myself, maybe as quick as 12 to 18 months.

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"I think so myself, maybe as quick as 12 to 18 months."

I agree, we are in a different media age this time, new travels the work in seconds.

I also feel that it will hurt the younger, rather than the old in the short-term. With long-term affects being felt for decades by the old. "The house is our pension" types will loose all or some of the pension.

If you haven't worked for it why are you entitled to it?

If you haven't got it why are you entitled to it?

I feel that people are only entitled to 3 to 3.5 time multipliers, anything else .... earn it!

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no it will take a long time

people will not stop buying overnight and those who bought expensive will be reluctant to sell at a lower price

property prices are very sticky going down. expect at lest 3 years of big falls then a drawn out period of small falls. i would expect at lest 5 years to bottom out and then perhaps 5 years of stagnation at the bottom

but it all depends on what the banks do, if they don’t remove high LTV mortgages we will not even get a Crash rather small falls. Then after the fall if they don’t introduce high LTV we will not get a boom again

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Probably not, but there could be larger drops in the short term as there are many properties which are presently empty, therefore they can go on the market at a moments notice. BTLers could take months to evict their tennants and families could take years before they can move / be removed by foreclosure.

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For me the overriding sentiment that has driven this boom is that it doesn’t matter what you pay, as long as you hold it for the long-term, property is always a good investment so I expect most people to refuse to sell at lower prices and the market to become very illiquid for a time as a result. I also wonder whether a lot of existing borrowers, with the help of the lenders, won’t switch away from repayment to interest only as rates rise to preserve their financial positions which will prop things up for a while longer. The Treasury, MPC and the lenders have all been acting in concert to blow this bubble so I expect them to do the same to keep it inflated. They must know the scale of the catastrophe that will visit itself on the economy if it all breaks down and they know who will be blamed so they’ll slash rates at the slightest sign of trouble. That’s why I think things will happen more slowly this time but the slump will, in the end, be a lot deeper and last a lot longer.

I also think that, at some point in the next 20 years, the idea that property is a good investment in any circumstances will become regarded as utterly insane by the general public.

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The property market is an oil tanker. You start moving one way, it takes ages to see any changes of direction, then eventually it changes direction, and then it takes ages to change direction again.

Once it starts going down there'll be no stopping it. We saw that last time, when interest rates went down, prices still fell.

Edited by the_duke_of_hazzard

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This will have been talked about before im pretty sure, but do people think the time from the highest to the lowest prices will be quicker this time?

The last crash took pretty much 3 years to go from the top to the bottom. Due to higher media coverage and in particular the internet will it be different this time?

I hope think so myself, maybe as quick as 12 to 18 months.

I also think 18 months, primarily because of BTLers. Many will sell quickly as their capital growth stops. Many more will simply go bankrupt.

Their properties will be recycled by auction, bought up by professional landlords at half price, rented out at lower rates, driving rents down, driving more BLTs into bankruptcy.

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For owner-occupied properties, I agree with SeenItAllBefore - the bubble will deflate very gradually (at first).

However, I think that Kagiso and Fred are right about newbuilds aimed at BTL. This market will crash much more quickly due to greater liquidity and the properties being much more overpriced in the first place.

The evidence I have for this is that values of BTL properties have already been falling in real terms for the past 3 years in my area, while values of other properties have risen 25%. In other words, the two markets have already diverged. Another relevant difference is in supply and demand: sales to FTBs are still fairly strong (for low-end properties at least), but doer-uppers and BTLers have more or less stopped hoovering up properties.

Edited by bugged bunny

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I think if there is a downturn- it will be very slow- more like a reduction in hpi than a massive decrease- the fact that a lot of households have 2 incomes may mean that owners are likely to keep their property for longer and wont sell at the first sign of trouble- as has been stated before- over the longterm-property increases-

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I think you may be looking at a house as somewhere to live as opposed to an investment. The bottom could take a long time and last longer. 10 years in Japan, so don't bank on buying a house in 2 years and making a wedge in 5 years!

There is also the fact that there is probably quite a bit of money still waiting in the wings so don't expect a smooth ride down.

Anybody claiming to know when (even how) this is going to play out is probably wrong!

Having said that I'm still sticking (more or less) to my prediction that the market peaked at the beginning of this year.

Edited by surfgatinho

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I think if there is a downturn- it will be very slow- more like a reduction in hpi than a massive decrease- the fact that a lot of households have 2 incomes may mean that owners are likely to keep their property for longer and wont sell at the first sign of trouble- as has been stated before- over the longterm-property increases-

I thought the boom was partly due to an increasing number of singletons?

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This will have been talked about before im pretty sure, but do people think the time from the highest to the lowest prices will be quicker this time?

The last crash took pretty much 3 years to go from the top to the bottom. Due to higher media coverage and in particular the internet will it be different this time?

I hope think so myself, maybe as quick as 12 to 18 months.

I think the downturn will last much longer this time but the initial correction could still be quite steep as the overcommited / BTL become forced sellers into an unwilling market. The level of mortgage debt (plus credit cards and other loans) is extremely high by historical standards and it will take some time for such debt deflation to work its way out of the system. Those who find themselves unsustainably in debt will only buy essentials and, given that much of the UK economy is now directed to discretionary spending, there will be quite a 'knock on' effect - those who think they have secure / well paid jobs in the discretionary side of the economy may well find this is no longer the case....which in turn brings more overcommited house buyers onto the sellers' list.

We've also been discussing on other threads the outlook for energy supplies which, imo, for the UK is bleak; we are rapidly heading for large scale energy imports at a time when world prices are high and rising. Rising global energy costs are already impacting food prices and in future years we are virtually certain to see UK consumers having to spend a higher proportion of their disposable income on food and energy. As a result they will have less to spend on more discretionary items....and that will include in quite a number of cases not being able to afford to finance such a large house. The energy situation will not improve in the short term - we are likely to be on an energy downslope through to 2075!

The best way I see of riding out the coming economic storm is to reduce / eliminate debt, try to position oneself on the 'producing' side of the economy i.e. deliver 'needs' not 'wants' and also to position one's lifestyle so as to live near work, shops and services (or be able to use mass transit to access same). The properties which will suffer most during the coming energy 'squeeze' will be those in low density developments which are extremely car dependent to access such facilities - the days of long distance commutes in single occupancy vehicles are drawing to a close.

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I think it depends on exactly how the market really looks now, and that's something I haven't been able to find out.

For example, I know that in Edinburgh, the dominant sentiment for the past 7-10 years has been if you're lucky enough to have bought in Edinburgh in time, on no account sell: prices will never fall here. HPI has been so daft that people have been seeing their property prices double every couple of years.

So where previously there was always a good turnover of small starter flats (often more like studio flats) suddenly supply has dried up as people simply refuse to sell. If they move on, they keep them and rent them out, or they put off moving on. This, more than BTL, could have an affect, as I can well imagine a rush to market as people realise prices have peaked and the see the "wealth" they believe they actually have begin to disappear. If this is a really big issue, and I suspect it is simply from the number of people in their 30s I know who are holding properties they no longer need, that could be bigger than the BTL crowd.

Also, how many foreigner investors are simply holding vast blocks of empty flats? And have they been buying and selling from other foreign investors, pushing the prices up artificially way beyond anything a regular buyer could afford? If so, that money could simply disappear elsewhere very suddenly.

With the information age, and globalisation, and the ability to invest in anything at the touch of a button, if there are major "problems" like that in the system, the crash could be very fast. The American on seems to have happened very fast. Sentiment can drive things up or down much faster now.

If there aren't massive, systemic problems like that, it could be much slower.

Who knows?

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The last crash took pretty much 3 years to go from the top to the bottom. Due to higher media coverage and in particular the internet will it be different this time?

It's just possible. There is easier access to information than last time. e.g.

  • Land Registry details free online

  • Rightmove

  • Propertysnake.co.uk

  • even HPC.co.uk

This might give buyers an edge in a falling market to help them push prices lower, quicker.

The corollary, is that all this information may have helped to fuel the bubble in the first place.

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Guest Shedfish

for me, the speculative element is the wild card - 'investors' weren't so ubiquitous in the 80s/90s. someone on this site put it quite eloquently, i'll have to paraphrase -

if you have one house, you'll do what you have to to keep one house

if you have five houses, you'll do what you have to to keep one house

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